New Jersey-2010-A3075-Introduced

An Act concerning public employer-public employee arbitration in certain cases, and amending P.L.1968, c.303 and P.L.1977, c.85.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 7 of P.L.1968, c.303 (C.34:13A-5.3) is amended to read as follows:

7. a. Except as hereinafter provided, public employees shall have, and shall be protected in the exercise of, the right, freely and without fear of penalty or reprisal, to form, join and assist any employee organization or to refrain from any such activity; provided, however, that this right shall not extend to elected officials, members of boards and commissions, managerial executives, or confidential employees, except in a school district the term managerial executive shall mean the superintendent of schools or his equivalent, nor, except where established practice, prior agreement or special circumstances dictate the contrary, shall any supervisor having the power to hire, discharge, discipline, or to effectively recommend the same, have the right to be represented in collective negotiations by an employee organization that admits nonsupervisory personnel to membership, and the fact that any organization has such supervisory employees as members shall not deny the right of that organization to represent the appropriate unit in collective negotiations; and provided further, that, except where established practice, prior agreement, or special circumstances dictate the contrary, no policeman shall have the right to join an employee organization that admits employees other than policemen to membership. The negotiating unit shall be defined with due regard for the community of interest among the employees concerned, but the commission shall not intervene in matters of recognition and unit definition except in the event of a dispute.

Representatives designated or selected by public employees for the purposes of collective negotiation by the majority of the employees in a unit appropriate for such purposes, by the majority of the employees voting in an election conducted by the commission as authorized by this act or, at the option of the representative in a case in which the commission finds that only one representative is seeking to be the majority representative, by a majority of the employees in the unit signing authorization cards indicating their preference for that representative, shall be the exclusive representatives for collective negotiation concerning the terms and conditions of employment of the employees in such unit. An authorization card indicating preference shall not be valid unless it is printed in a language understood by the employees who signs it.

Nothing herein shall be construed to prevent any official from meeting with an employee organization for the purpose of hearing the views and requests of its members in such unit so long as (a) the majority representative is informed of the meeting; (b) any changes or modifications in terms and conditions of employment are made only through negotiation with the majority representative; and (c) a minority organization shall not present or process grievances. Nothing herein shall be construed to deny to any individual employee his rights under Civil Service laws or regulations. When no majority representative has been selected as the bargaining agent for the unit of which an individual employee is a part, he may present his own grievance either personally or through an appropriate representative or an organization of which he is a member and have such grievance adjusted.

b. A majority representative of public employees in an appropriate unit shall be entitled to act for and to negotiate agreements covering all employees in the unit and shall be responsible for representing the interest of all such employees without discrimination and without regard to employee organization membership. Proposed new rules or modifications of existing rules governing working conditions shall be negotiated with the majority representative before they are established. In addition, the majority representative and designated representatives of the public employer shall meet at reasonable times and negotiate in good faith with respect to grievances, disciplinary disputes, and other terms and conditions of employment. Nothing herein shall be construed as permitting negotiation of the standards or criteria for employee performance.

When an agreement is reached on the terms and conditions of employment, it shall be embodied in writing and signed by the authorized representatives of the public employer and the majority representative.

Whenever the public employer and the majority representative of public employees are unable to reach an agreement concerning the terms and conditions of employment through direct negotiation, the commission shall provide for the impartial selection of a mediator, factfinder, and arbitrator, as is necessary, from its panels. In the case of an arbitrator, the commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the arbitrator for assignment by lot.

In any proceeding where an arbitrator selected by mutual agreement is unable to serve, the commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the arbitrator for assignment by lot.

In any proceeding where an assigned arbitrator is unable to serve, the commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the replacement arbitrator for assignment by lot.

(1) No public employer or exclusive representative of public employees shall enter into a collective agreement concerning the terms and conditions of employment which, on an annual basis, exceeds an amount equal to 2.5 percent more than the aggregate expended by the public employer on economic issues for the members of the affected employee organization in the immediately preceding employment year. For the purposes of this paragraph, economic issues shall include wages, salaries, hours in relation to earnings, and other forms of compensation such as paid vacation, paid holidays, health and medical insurance and other economic benefits accruing to the employees represented by the affected employee organization.

(2) No mediator, factfinder, or arbitrator assigned by the commission shall recommend or award any collective negotiation settlement or agreement which exceeds the limitation set forth in paragraph (1) of this subsection.

(3) When deciding an award, the arbitrator shall base the decision on a reasonable determination of the issues, giving due weight to those factors listed below that are judged relevant for the resolution of the specific dispute. In the award, the arbitrator shall indicate which of the following factors are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor:

(a) The interests and welfare of the public. Among the items the arbitrator deciding a dispute between a local government employer and the public employees of that local unit shall assess when considering this factor are the limitations imposed upon the employer by P.L.1976, c.68 (C.40A:4-45.1 et seq.).

(b) Comparison of the wages, salaries, hours, and conditions of employment of the employees involved in the arbitration proceedings with the wages, hours, and conditions of employment of other employees performing the same or similar services and with other employees generally:

(i) In private employment in general; provided, however, each party shall have the right to submit additional evidence for the arbitrator's consideration.

(ii) In public employment in general; provided, however, each party shall have the right to submit additional evidence for the arbitrator's consideration.

(iii) In disputes between a local government employer and the public employees of that local unit, a comparison in public employment in the same or similar comparable jurisdictions, as determined in accordance with section 5 of P.L.1995, c.425 (C.34:13A-16.2); provided, however, that each party shall have the right to submit additional evidence concerning the comparability of jurisdictions for the arbitrator's consideration.

(c) The overall compensation presently received by the employees, inclusive of direct wages, salary, vacations, holidays, excused leaves, insurance and pensions, medical and hospitalization benefits, and all other economic benefits received.

(d) Stipulations of the parties.

(e) The lawful authority of the employer. Among the items an arbitrator deciding a dispute between a local government employer and the public employees of that local unit shall assess when considering this factor are the limitations imposed upon the employer by P.L.1976, c.68 (C.40A:4-45.1 et seq.).

(f) The financial impact on the governing unit, its residents and taxpayers. When considering this factor in a dispute in which the public employer is a county or municipality, the arbitrator shall take into account, to the extent that evidence is introduced, how the award will affect the municipal or county purposes element, as the case may be, of the local property tax; a comparison of the percentage of the municipal purposes element or, in the case of a county, the county purposes element, required to fund the employees' contract in the preceding local budget year with that required under the award for the current local budget year; the impact of the award for each income sector of the property taxpayers of the local unit; the impact of the award on the ability of the governing body to: (a) maintain existing local programs and services, (b) expand existing local programs and services for which public moneys have been designated by the governing body in a proposed local budget, or (c) initiate any new programs and services for which public moneys have been designated by the governing body in a proposed local budget.

(g) The cost of living.

(h) The continuity and stability of employment including seniority rights and such other factors not confined to the foregoing which are ordinarily or traditionally considered in the determination of wages, hours, and conditions of employment through collective negotiations and collective bargaining between the parties in the public service and in private employment.

(i) Statutory restrictions imposed on the employer. Among the items an arbitrator in a dispute between a local government employer and the public employees of that local unit shall assess when considering this factor are the limitations imposed upon the employer by section 10 of P.L.2007, c.62 (C.40A:4-45.45).

Public employers shall negotiate written policies setting forth grievance and disciplinary review procedures by means of which their employees or representatives of employees may appeal the interpretation, application or violation of policies, agreements, and administrative decisions, including disciplinary determinations, affecting them, provided that such grievance and disciplinary review procedures shall be included in any agreement entered into between the public employer and the representative organization. Such grievance and disciplinary review procedures may provide for binding arbitration as a means for resolving disputes. Except as otherwise provided herein, the procedures agreed to by the parties may not replace or be inconsistent with any alternate statutory appeal procedure nor may they provide for binding arbitration of disputes involving the discipline of employees with statutory protection under tenure or civil service laws, except that such procedures may provide for binding arbitration of disputes involving the minor discipline of any public employees protected under the provisions of section 7 of P.L.1968, c.303 (C.34:13A-5.3), other than public employees subject to discipline pursuant to R.S.53:1-10. Grievance and disciplinary review procedures established by agreement between the public employer and the representative organization shall be utilized for any dispute covered by the terms of such agreement. For the purposes of this section, minor discipline shall mean a suspension or fine of less than five days unless the employee has been suspended or fined an aggregate of 15 or more days or received more than three suspensions or fines of five days or less in one calendar year.

Where the State of New Jersey and the majority representative have agreed to a disciplinary review procedure that provides for binding arbitration of disputes involving the major discipline of any public employee protected under the provisions of this section, other than public employees subject to discipline pursuant to R.S.53:1-10, the grievance and disciplinary review procedures established by agreement between the State of New Jersey and the majority representative shall be utilized for any dispute covered by the terms of such agreement. For the purposes of this section, major discipline shall mean a removal, disciplinary demotion, suspension or fine of more than five days, or less where the aggregate number of days suspended or fined in any one calendar year is 15 or more days or unless the employee received more than three suspensions or fines of five days or less in one calendar year.

In interpreting the meaning and extent of a provision of a collective negotiation agreement providing for grievance arbitration, a court or agency shall be bound by a presumption in favor of arbitration. Doubts as to the scope of an arbitration clause shall be resolved in favor of requiring arbitration. The commission shall take measures to assure the impartial selection of an arbitrator for grievance arbitration and Special Disciplinary Arbitration from its special panel of arbitrators. The commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the arbitrator for assignment by lot.

c. The parties shall share equally the costs of arbitration entered into under this section subject to a fee schedule approved by the commission.

The fee schedule shall provide that the costs of services provided by the arbitrator, be it a grievance arbitration or one concerning the terms and conditions of employment, shall not exceed $1,000 per day. The commission may increase this fee by an amount not to exceed 2.5 percent biennially.

If the parties cancel an arbitration procedure at least 15 days, but less than 31 days prior to its scheduled commencement, the commission may impose a fee of not more than $500. The parties shall share equally in paying that fee.

If the parties cancel an arbitration procedure more than 30 days prior to its scheduled commencement, the commission shall impose no fee.

d. Applicants for appointment to the commission's special panel of arbitrators shall be chosen based on their professional qualifications, knowledge, and experience, in accordance with the criteria and rules adopted by the commission.

e. Arbitrators serving on the commission's special panel shall be guided by and subject to the objectives and principles set forth in the "Code of Professional Responsibility for Arbitrators of Labor-Management Disputes" of the National Academy of Arbitrators, The American Arbitration Association, and the Federal Mediation and Conciliation Service.

f. Within 90 days of the effective date of P.L. , c, (C. ) (pending before the Legislature as this bill), the commission shall adopt rules and regulations consistent with the ethical standards, disclosure requirements, and limits on contributions to candidates, political parties and committees otherwise set forth in law. A person violating those rules and regulations shall not be eligible for appointment to the commission's special panel of arbitrators. Any member of the commission's special panel of arbitrators who violates those rules and regulations shall be removed from the special panel.

(cf: P.L.2005, c.380, s.1)

2. Section 3 of P.L.1977, c.85 (C.34:13A-16) is amended to read as follows:

3. a. (1) Negotiations between a public fire or police department and an exclusive representative concerning the terms and conditions of employment shall begin at least 120 days prior to the day on which their collective negotiation agreement is to expire. The parties shall meet at least three times during that 120-day period. The first of those three meetings shall take place no later than the 90th day prior to the day on which their collective negotiation agreement is to expire. By mutual consent, the parties may agree to extend the period during which the second and third meetings are required to take place beyond the day on which their collective negotiation agreement is to expire. A violation of this paragraph shall constitute an unfair practice and the violator shall be subject to the penalties prescribed by the commission pursuant to rule and regulation.

(2) Whenever those negotiations concerning the terms and conditions of employment shall reach an impasse, the commission, through the Division of Public Employment Relations shall, upon the request of either party, or upon its own motion take such steps, including the assignment of a mediator, as it may deem expedient to effect a voluntary resolution of the impasse.

b. (1) In the event of a failure to resolve the impasse by mediation, the Division of Public Employment Relations, at the request of either party, shall invoke factfinding with recommendation for settlement of all issues in dispute unless the parties reach a voluntary settlement prior to the issuance of the factfinder's report and recommended terms of settlement. Factfindings shall be limited to those issues that are within the required scope of negotiations unless the parties to the factfinding agree to factfinding on permissive subjects of negotiation. In the event of a continuing failure to resolve an impasse by means of the procedure set forth in this paragraph, and notwithstanding the fact that such procedures have not been exhausted, the parties shall notify the commission, at a time and in a manner prescribed by the commission, as to whether or not they have agreed upon a terminal procedure for resolving the issues in dispute. Any terminal procedure mutually agreed upon by the parties shall be reduced to writing, provide for finality in resolving the issues in dispute, and shall be submitted to the commission for approval.

(2) Notwithstanding the provisions of paragraph (2) of subsection a. of this section or paragraph (1) of this subsection, either party may petition the commission for arbitration on or after the date on which their collective negotiation agreement expires. The petition shall be filed in a manner and form prescribed by the commission. The party filing the petition shall notify the other party of its action. The notice shall be given in a manner and form prescribed by the commission.

Within 10 days of the receipt of the notice by the non-petitioning party, the parties shall notify the commission as to whether or not they have agreed upon a terminal procedure for resolving the issues in dispute. Any terminal procedure mutually agreed upon by the parties shall be reduced to writing, provide for finality in resolving the issues in dispute, and shall be submitted to the commission for approval. If the parties fail to agree on a terminal procedure, they shall be subject to the provisions of subsection d. of this section.

c. Terminal procedures that are approvable include, but shall not be limited to the following:

(1) Conventional arbitration of all unsettled items.

(2) Arbitration under which the award by an arbitrator or panel of arbitrators is confined to a choice between (a) the last offer of the employer and (b) the last offer of the employees' representative, as a single package.

(3) Arbitration under which the award is confined to a choice between (a) the last offer of the employer and (b) the last offer of the employees' representative, on each issue in dispute, with the decision on an issue-by-issue basis.

(4) If there is a factfinder's report with recommendations on the issues in dispute, the parties may agree to arbitration under which the award would be confined to a choice among three positions: (a) the last offer of the employer as a single package, (b) the last offer of the employees' representative as a single package, or (c) the factfinder's recommendations as a single package.

(5) If there is a factfinder's report with a recommendation on each of the issues in dispute, the parties may agree to arbitration under which the award would be confined to a choice on each issue from among three positions: (a) the last offer of the employer on the issue, (b) the employee representative's last offer on the issue, or (c) the factfinder's recommendation on the issue.

(6) Arbitration under which the award on the economic issues in dispute is confined to a choice between (a) the last offer of the employer on the economic issues as a single package and (b) the employee representative's last offer on the economic issues as a single package; and, on any noneconomic issues in dispute, the award is confined to a choice between (a) the last offer of the employer on each issue in dispute and (b) the employee representative's last offer on that issue.

d. The following procedure shall be utilized if parties fail to agree on a terminal procedure for the settlement of an impasse dispute:

(1) In the event of a failure of the parties to agree upon an acceptable terminal procedure the parties shall separately so notify the commission in writing, indicating all issues in dispute and the reasons for their inability to agree on the procedure. The substance of a written notification shall not provide the basis for any delay in effectuating the provisions of this subsection.

(2) Upon receipt of such notification from either party or on the commission's own motion, the procedure to provide finality for the resolution of issues in dispute shall be binding arbitration under which the award on the unsettled issues is determined by conventional arbitration. The arbitrator shall separately determine whether the total net annual economic changes for each year of the agreement are reasonable under the nine statutory criteria set forth in subsection g. of this section.

e. (1) The commission shall take measures to assure the impartial selection of an arbitrator or arbitrators from its special panel of arbitrators. [Unless the parties, in a time and manner prescribed by the commission, mutually agree upon the selection of an arbitrator from the commission's special panel of arbitrators and so notify the commission in writing of that selection, the assignment of any arbitrator for the purposes of this act shall be the responsibility of the commission, independent of and without any participation by either of the parties.] The commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the arbitrator for assignment by lot.

In any proceeding where an arbitrator selected by mutual agreement is unable to serve, [the two parties shall be afforded an opportunity to select a replacement. If the two parties are unable to mutually agree upon the selection of a replacement within a time period prescribed by the commission,] the commission shall [select the replacement in the manner hereinafter provided] randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the arbitrator for assignment by lot.

In any proceeding where an assigned arbitrator is unable to serve [or, pursuant to the preceding paragraph, the two parties are unable to mutually agree upon a replacement, the commission shall assign a replacement arbitrator. The assignment shall be the responsibility of the commission, independent of and without any participation by either parties. The] , the commission shall randomly select three names from its special panel of arbitrators and submit them to the parties. If the parties fail to mutually agree upon the selection of an arbitrator from the list of three within 10 days of their receipt of the list of names from the commission, the commission shall select the replacement arbitrator for assignment by lot.

(2) Applicants for initial appointment to the commission's special panel of arbitrators shall be chosen based on their professional qualifications, knowledge, and experience, in accordance with the criteria and rules adopted by the commission. Appointment to the commission's special panel of arbitrators shall be for a three-year term, with reappointment contingent upon a screening process similar to that used for determining initial appointments.

(3) Arbitrators serving on the commission's special panel shall be guided by and subject to the objectives and principles set forth in the "Code of Professional Responsibility for Arbitrators of Labor-Management Disputes" of the National Academy of Arbitrators, The American Arbitration Association, and the Federal Mediation and Conciliation Service.

(4) Within 90 days of the effective date of P.L. , c, (C. ) (pending before the Legislature as this bill), the commission shall adopt rules and regulations consistent with the ethical standards, disclosure requirements, and limits on contributions to candidates, political parties and committees otherwise set forth in law. A person violating those rules and regulations shall not be eligible for appointment to the commission's special panel of arbitrators. Any member of the commission's special panel of arbitrators who violates those rules and regulations shall be removed from the special panel.

The commission may suspend, remove, or otherwise discipline an arbitrator for a violation of P.L.1977, c.85 (C.34:13A-14 et seq.), section 4 of P.L.1995, c.425 (C.34:13A-16.1) or for good cause.

f. (1) At a time prescribed by the commission, the parties shall submit to the arbitrator or tripartite panel of arbitrators their final offers on each economic and non-economic issue in dispute. The offers submitted pursuant to this section shall be used by the arbitrator for the purposes of determining an award pursuant to paragraph (2) of subsection d. of this section. The commission shall promulgate rules and procedures governing the submission of the offers required under this paragraph, including when those offers shall be deemed final, binding and irreversible.

(2) In the event of a dispute, the commission shall have the power to decide which issues are economic issues. Economic issues include those items which have a direct relation to employee income including wages, salaries, hours in relation to earnings, and other forms of compensation such as paid vacation, paid holidays, health and medical insurance, and other economic benefits to employees.

(3) Throughout formal arbitration proceedings the chosen arbitrator or panel of arbitrators may mediate or assist the parties in reaching a mutually agreeable settlement.

(4) Arbitration shall be limited to those subjects that are within the required scope of collective negotiations, except that the parties may agree to submit to arbitration one or more permissive subjects of negotiation.

(5) The decision of an arbitrator or panel of arbitrators shall include an opinion and an award, and shall be rendered within 120 days of the selection of the arbitrator by the mutual agreement of both parties or the commission's assignment of that arbitrator or panel of arbitrators, as the case may be, pursuant to paragraph (1) of subsection e. of this section; provided, however, the arbitrator or panel of arbitrators, for good cause, may petition the commission for an extension of not more than 60 days. The two parties, by mutual consent, may agree to an extension. The parties shall notify the arbitrator and the commission of any such agreement in writing. The notice shall set forth the specific date on which the extension shall expire. Any arbitrator or panel of arbitrators violating the provisions of this paragraph may be subject to the commission's powers under paragraph (2) of subsection e. of this section. The decision shall be final and binding upon the parties and shall be irreversible, except:

(a) Within 14 days of receiving an award, an aggrieved party may file notice of an appeal of an award to the commission on the grounds that the arbitrator failed to apply the criteria specified in subsection g. of this section or violated the standards set forth in N.J.S.2A:24-8 or N.J.S.2A:24-9. The appeal shall be filed in a form and manner prescribed by the commission. In deciding an appeal, the commission, pursuant to rule and regulation and upon petition, may afford the parties the opportunity to present oral arguments. The commission may affirm, modify, correct or vacate the award or may, at its discretion, remand the award to the same arbitrator or to another arbitrator, selected by lot, for reconsideration. An aggrieved party may appeal a decision of the commission to the Appellate Division of the Superior Court.

(b) An award that is not appealed to the commission shall be implemented immediately. An award that is appealed and not set aside by the commission shall be implemented within 14 days of the receipt of the commission's decision absent a stay.

(6) The parties shall [bear] share equally the costs of arbitration subject to a fee schedule approved by the commission. The fee schedule shall provide that the costs of services provided by the arbitrator, be it an interest or grievance arbitration case, shall not exceed $1,000 per day. The commission may increase this fee by an amount not to exceed 2.5 percent biennially.

If the parties cancel an arbitration procedure more than 30 days prior to its scheduled commencement, the commission shall impose no fee.

g. The arbitrator or panel of arbitrators shall decide the dispute based on a reasonable determination of the issues, giving due weight to those factors listed below that are judged relevant for the resolution of the specific dispute. In the award, the arbitrator or panel of arbitrators shall indicate which of the factors are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor; provided, however, that the arbitrator or panel of arbitrators shall not render any award, and no public employer or exclusive representative of public employees shall enter into any agreement, which, on an annual basis, exceeds an amount equal to 2.5 percent more than of the aggregate expended by the public employer on economic issues for the members of the affected employee organization in the immediately preceding employment year. For the purposes of this paragraph, economic issues shall include wages, salaries, hours in relation to earnings, and other forms of compensation such as paid vacation, paid holidays, health and medical insurance and other economic benefits accruing to the employees represented by the affected employee organization:

(1) The interests and welfare of the public. Among the items the arbitrator or panel of arbitrators shall assess when considering this factor are the limitations imposed upon the employer by P.L.1976, c.68 (C.40A:4-45.1 et seq.).

(2) Comparison of the wages, salaries, hours, and conditions of employment of the employees involved in the arbitration proceedings with the wages, hours, and conditions of employment of other employees performing the same or similar services and with other employees generally:

(a) In private employment in general; provided, however, each party shall have the right to submit additional evidence for the arbitrator's consideration.

(b) In public employment in general; provided, however, each party shall have the right to submit additional evidence for the arbitrator's consideration.

(c) In public employment in the same or similar comparable jurisdictions, as determined in accordance with section 5 of P.L.1995, c.425 (C.34:13A-16.2); provided, however, that each party shall have the right to submit additional evidence concerning the comparability of jurisdictions for the arbitrator's consideration.

(3) The overall compensation presently received by the employees, inclusive of direct wages, salary, vacations, holidays, excused leaves, insurance and pensions, medical and hospitalization benefits, and all other economic benefits received.

(4) Stipulations of the parties.

(5) The lawful authority of the employer. Among the items the arbitrator or panel of arbitrators shall assess when considering this factor are the limitations imposed upon the employer by P.L.1976, c.68 (C.40A:4-45.1 et seq.).

(6) The financial impact on the governing unit, its residents and taxpayers. When considering this factor in a dispute in which the public employer is a county or a municipality, the arbitrator or panel of arbitrators shall take into account, to the extent that evidence is introduced, how the award will affect the municipal or county purposes element, as the case may be, of the local property tax; a comparison of the percentage of the municipal purposes element or, in the case of a county, the county purposes element, required to fund the employees' contract in the preceding local budget year with that required under the award for the current local budget year; the impact of the award for each income sector of the property taxpayers of the local unit; the impact of the award on the ability of the governing body to (a) maintain existing local programs and services, (b) expand existing local programs and services for which public moneys have been designated by the governing body in a proposed local budget, or (c) initiate any new programs and services for which public moneys have been designated by the governing body in a proposed local budget.

(7) The cost of living.

(8) The continuity and stability of employment including seniority rights and such other factors not confined to the foregoing which are ordinarily or traditionally considered in the determination of wages, hours, and conditions of employment through collective negotiations and collective bargaining between the parties in the public service and in private employment.

(9) Statutory restrictions imposed on the employer. Among the items the arbitrator or panel of arbitrators shall assess when considering this factor are the limitations imposed upon the employer by section 10 of P.L.2007, c.62 (C.40A:4-45.45).

h. A mediator, factfinder, or arbitrator while functioning in a mediatory capacity shall not be required to disclose any files, records, reports, documents, or other papers classified as confidential received or prepared by him or to testify with regard to mediation, conducted by him under this act on behalf of any party to any cause pending in any type of proceeding under this act. Nothing contained herein shall exempt such an individual from disclosing information relating to the commission of a crime.

(cf: P.L.2007, c.62, s.14)

3. This act shall take effect first day of the fourth month following enactment.

STATEMENT

This bill implements the Governor's "Tool Kit" proposals for public employer - public employee arbitration.

The first section of the bill focuses on public employer - public employee arbitration in general.

The "Tool Kit" proposal adds a procedure for selecting arbitrators for both contract negotiations and grievance disputes. Under this procedure, the Public Employee Relations Commission (PERC) is to randomly select three arbitrators from its special panel of arbitrators and submit them to the disputing parties for consideration. If the parties are unable to mutually agree on one of the three arbitrators within 10 days, PERC is to select the arbitrator by lot.

The proposal also imposes a 2.5 percent cap on arbitration awards and collective bargaining agreements. The new language specifically prohibits any mediator, factfinder or arbitrator from recommending or awarding any settlement that would exceed by more than 2.5 percent the aggregate amount expended by the public employer on economic issues for the members of the affected employee organization in the immediately preceding employment year. The proposal further provides that no public employer or public employee organization can enter into any agreement on economic issues that exceed the 2.5 percent cap. Economic issues are defined as wages, salaries, hours in relation to earnings, and other forms of compensation, such as paid vacation, paid holidays, health and medical insurance, and other economic benefits accruing to the employees represented by the affected employee organization.

In addition, the proposal sets forth specific criteria an arbitrator is to consider when deciding an arbitration award. Those criteria include consideration of the impact the award would have on local property taxes, the restrictions imposed on local government employers by the "cap law," a comparison of public and private sector wages, benefits and conditions of employment, and the general public interest and welfare.

The second section of the bill focuses on a particular type of public employer - public employee arbitration: arbitration between local units and the police and fire unions. This particular type of arbitration is commonly known as interest arbitration.

The "Tool Kit" proposal makes a slight change to the current procedure disputing local governments and their police and fire unions follow in selecting an arbitrator. Under existing law, the disputing parties are permitted to consider all the members of PERC's special panel when attempting to select an arbitrator. The proposal provides that PERC randomly select three arbitrators for the disputing parties to consider. If they fail to agree on an arbitrator within 10 days, PERC is to assign the arbitrator as it currently does--by lot.

The proposal also imposes the 2.5 percent cap restriction on parties involved in interest arbitration. As in the section concerning general public employers - public employee negotiations, the new interest arbitration language specifically prohibits any mediator, factfinder or arbitrator from recommending or awarding any settlement that would exceed by more than 2.5 percent the aggregate amount expended by the public employer on economic issues for the members of the affected police or fire union organization in the immediately preceding employment year. The proposal further provides that no public employer or police or fire union can enter into any agreement on economic issues that exceed the 2.5 percent cap. Economic issues are defined as wages, salaries, hours in relation to earnings, and other forms of compensation, such as paid vacation, paid holidays, health and medical insurance, and other economic benefits accruing to the members of the police or fire union.

There are several elements of the "Tool Kit" proposal that apply to both types of arbitration. They include stipulations concerning the professional qualifications for appointment, the adoption of rules concerning ethical standards and political activities, the implementation of a fee schedule for arbitration services, and a clarification that the parties are to share equally the costs of any arbitration.